Gold, Silver Set Record High on China Buying Bets

Commodities – Metals

Spot Gold (NY Close): $1506.85 // +0.60 // +0.04%

Prices gapped higher through resistance at $1508.95, the 200% Fibonacci extension of the 3/7-3/15 downswing, to challenge the top of a rising channel in place since mid-March. A break above this boundary exposes the 238.2% Fib at $1533.44. The 200% Fib level has been recast as near-term support.

Precious metal prices soared in overnight trade following a report from Century Magazine that claimed China plans to invest some of its more than $3 trillion in FX reserves in various assets including energy and precious metals. PBOC chief ZhouXiaochuan has said the current build-up has exceeded “reasonable” levels, while independent reports have pegged the “right” amount of FX reserves for China at no more than $1.3 trillion.

Spot Silver (NY Close): $47.25 // +0.65 // +1.40%

Prices gapped above resistance at the top of a rising channel in place since late January, setting a new record high at $49.78. The metal is now in uncharted territory, making forecasting decidedly difficult, but deeply overbought relative strength studies suggest the threat of reversal is increasingly high. The channel top, now at $46.91, stands as near-term support.

The short-term directional correlation between gold and silver remains firm, suggesting the two metals will continue to move along the same trajectory. The gold/silver ratio has set a new record low however, meaning the cheaper metal is likely to continue outperforming its more expensive counterpart.

Daily FX | 25 April 2010 - read full post

Silver's Up - Keep It Up!

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Gold to Silver ratio : 3 months chart - 11.25.2010

Silver shines in gold's shadow.

Is silver about to streak higher?


Silver's price has risen 8% in the past month, recently topping $20 an ounce for the first time since early 2008. The rally comes at a time when gold has been hitting new highs, on the latest round of fears that crisis-crazed central bankers will destroy the value of paper money.

The poor man's rally

Silver remains far from its own peak, set 30 years ago at a time of high inflation and a hare-brained attempt to corner the market. Unless the wheels fall completely off the global economy, silver seems unlikely to recapture its record high of $49.45 again any time soon.

Even so, silver could take on a new shine in coming months, as a slowing economy prods policymakers further out onto an easy money limb and buyers ponder just how high gold prices can go.

"Silver has been kind of going along as the poor man's gold," said Howard Simons, a strategist at Bianco Research in Chicago. "The gold-silver ratio right now is telling traders to buy silver."

Simons notes that at recent prices an ounce of gold can purchase 63 ounces of silver. Though this is hardly a historically unheard of ratio, the urge to buy the cheaper metal could push silver prices up as traders hedge their bets on gold.

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